Three Chimneys Farm president says Thoroughbred industry more disciplined after 'worldwide crash'

Next to the world economy, the biggest recent factor affecting the Thoroughbred breeding business that surrounds Midway was the purchase of a regional bank in Cleveland by one in Pittsburgh, Three Chimneys Farm President Chase Clay, right, told The Lane Report in an interview published in the magazine's current edition and online. But Clay says the resulting decline in breeding, also a function of the economy, wasn't entirely a bad thing, even as the industry suffered "a worldwide crash."

"PNC Bank decided to exit lending to the equine industry," Clay told Publisher Ed Lane. "National City invested an estimated $400 million in equine loans, most of which has disappeared. When less money is available for lending, there are fewer horses because bottom-end mares are not being bred. The lowest-quality mares shouldn’t have been breeding from the start. They should have been pets, in my opinion. The breeders with the lowest-quality mares didn’t have the borrowing capability or the cash to breed the horse, so they didn’t breed them. There are some positives to that. Now it’s more of a flight to quality, which is a good thing. As supply declines – 4,500 horses as opposed to 5,500 – and demand remains the same, then prices go up, which thankfully happened this year," most notably at the September yearling sales at Keeneland.

Clay, 37, said breeders, trainers and owners tell him 2009 and 2010 were "the most difficult financially for our industry" that they can remember. "If our industry can maintain the discipline that it learned over the last two years," he said, "then our future margins will be higher."

In the interview, Clay also discussed the farm's recent sales and breeding success (its top stallion, Dynaformer, is fetching a stud fee of $150,000) and how and why he returned to the family farm to manage it, and this interesting analogy: "Our business is equivalent to the oil business. Investors drill 11 holes – we have 11 stallions – and one or two will gush oil, and one or two of them won’t. But they all cost money to drill." (Read more)